The One Big Beautiful Bill: An Overview

At a glance:

• The main takeaway: As of the publication date, legislation on what is being called the “One Big Beautiful Bill” has passed the House and will likely face substantial hurdles in the Senate around Medicaid funding, food assistance, energy credits, the SALT cap, and spending cuts. 
• Impact on your business: The uncertainty surrounding the bill’s passage means businesses and individuals cannot plan for specific tax provisions, which can create added complexity to forecast potential financial impacts.   
• Next steps: Aprio’s tax advisors are proactively monitoring tax legislation developments and are prepared to help you navigate the potential changes. 

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The full story

After weeks of discord, the House of Representatives passed a measure to extend the provisions of the 2017 Tax Cuts and Jobs Act (TCJA), provide other targeted tax breaks such as temporarily pausing taxes on tips and overtime, and increase defense and border security spending. Titled the “One Big Beautiful Bill,” this new legislation will also reduce Medicaid spending as well as spending on food assistance programs.

What’s next for the One Big Beautiful Bill?

However, passing the House was just the first step in the bill’s difficult journey to law. It now moves on to the Senate floor where it will face Senators who have already voiced their objections to the bill’s provisions on energy credits, Medicaid, food assistance, and overall spending cuts. If the Senate changes any provisions of the House bill, the House must either accept the Senate version, or the House and Senate bodies will need to form a conference committee to reconcile the two bills.

While the House leadership has set an enactment date of July 4^th to celebrate passage of the legislation, it is possible that the bill may not be passed by that date in its current form. In fact, if recent history is any example, it is possible that the bill may not be enacted until much closer to the end of the federal fiscal year, which is September 30. Since the bill remains in a fluid situation, this article outlines some of the bill’s key provisions, along with its projected financial impact, possible impediments to passage, and potential amendments as of May 21, 2025. It is still premature to begin tax planning in regard to specific provisions within the bill, as many are subject to change prior to the final passage of the legislation.

Key Provisions as the Current Tax Bill Stands

Individual Income Tax Provisions

• Tax Brackets and Rates: Permanently adopts the modified federal income tax brackets and reduced rates established by the TCJA, with an inflation adjustment for all brackets except the top 37% bracket.
• Standard Deduction: Makes the expanded TCJA standard deduction permanent, temporarily boosting the standard deduction by $2,000 for joint filers, $1,500 for head of household, and $1,000 for all other taxpayers from 2025 through the end of 2028.
• Personal Exemption: Permanently repeals the deduction for personal exemptions.
• Mortgage Interest: Makes the $750,000 deduction for qualified home mortgage interest deduction permanent.
• SALT Deduction: Permanently raises the state and local tax (SALT) deduction cap to $40,000 with a phased reduction beginning at $250,000 for single filers and $500,000 for joint filers.
• Disaster Losses: Makes the itemized deduction for personal casualty losses from federally declared disasters permanent.
• Miscellaneous Deductions: Permanently eliminates miscellaneous itemized deductions.
• Gambling Losses: Requires that deductions for wagering be limited to the amount of wagering winnings.
• Moving Expenses: Eliminates the exclusion for qualified moving expense reimbursement and the deduction for moving expenses, except for active-duty military personnel.
• Itemized Deduction Cap: Caps the value of each dollar of itemized deductions at $0.35 for those in the highest income tax bracket.
• Child Tax Credit: Permanently extends the $2,000 per-child credit and associated income phase-out thresholds. Beginning after 2026, the credit amount will be indexed for inflation (rounded down to the nearest $100). From 2025 to 2028, the maximum credit temporarily increases to $2,500.
• Alternative Minimum Tax (AMT): Permanently extends the increased AMT exemption amounts and phase-out thresholds.
• Tipped Income Deduction: Creates a temporary deduction from 2025 to 2028 for qualified tip income in traditionally tipped industries, excluding highly compensated employees.
• Auto Loan Interest: Allows a temporary deduction (up to $10,000) for auto loan interest on U.S.-assembled vehicles from 2025 to 2028. The deduction begins to phase out by $200 for every $1,000 of income above $100,000 for single filers and $200,000 for joint filers.
• Senior Deduction: Adds a $4,000 deduction for seniors (65+) from 2025 to 2028, with income caps of $75,000 (single) and $150,000 (joint).
• Overtime Deduction: Introduces a deduction for overtime compensation from 2025 to 2028, excluding highly compensated individuals.

Business Tax Provisions

• Section 199A Deduction: Makes the 20% deduction for pass-through income permanent and increases it to 23% starting in 2026.
• SALT Cap Workarounds: Closes SALT cap avoidance strategies for pass-through entities (PTEs) engaged in Specified Service Trade or Businesses.
• Excess Business Loss Limitation: Permanently extends the limitation on excess business losses for noncorporate taxpayers, allowing any unused losses to carry forward to the subsequent year. However, the losses will be taken into account in the computation of the excess business loss for that subsequent year.
• Charitable Contributions: Limits the deductibility of C corporation charitable contributions by introducing a 1% floor. Amounts over the 10% cap may be carried forward.
• Executive Compensation: Applies aggregation rules to existing compensation limits for certain covered employees earning over $1 million annually.
• FICA Tip Credit: Expands the FICA tip credit to cover employer-paid Social Security taxes on tips in beauty service businesses (e.g., hair care, nail salons, esthetics).
• Bonus Depreciation: Restores 100% bonus depreciation for qualified property acquired from 2025 through 2029.
• R&D Expensing: Allows immediate expensing of domestic R&D costs from 2025 through 2029.
• Interest Expense Limitation: Increases the cap on business interest deductibility by allowing depreciation, amortization, and depletion to be excluded from adjusted taxable income, effective from 2025 to 2029.
• Qualified Production Property: Permits full expensing of qualified production property placed in service by the end of 2032, provided construction begins before the end of 2028 and is part of a qualified production activity.

Energy and Environment Provisions

• Energy Tax Credits: Accelerates the expiration of several energy-related credits to December 31, 2025, including:
  • Clean vehicle credit
  • Alternative fuel refueling property credit
  • Energy-efficient home improvement credit
  • Residential clean energy credit
  • New energy-efficient home credit

• IRA Clean Energy Credits: Restrictions were placed on the following:
  • Clean electricity production credit
  • Clean electricity and investment credit
  • Zero-emission nuclear power production credit
  • Termination of the clean hydrogen production credit

• Advanced Manufacturing Tax Credit: Terminates the advanced manufacturing production credit for wind components after 2027; all remaining credits end after 2031.

Projected Financial Impact of the One Big Beautiful Bill

While the Congressional Budget Office (CBO) has not had time to provide an analysis of the bill as it stands now, it is estimated that the deficit will increase by an additional $4 trillion over the 10-year period beginning in 2026 as a result of the measures in this bill. If the temporary provisions in the measure are extended beyond the expiration dates provided in the bill, the projected deficit increase rises to over $4.5 trillion. Federal spending, with subsidies, is expected to decrease by $1 trillion. Furthermore, household resources for the lowest tax brackets will decrease by about 2% in 2027 and 4% in 2033, whereas those taxpayers in the highest tax brackets will see an increase of 4% in 2027 and 2% in 2033.

The bottom line

The “One Big Beautiful Bill” is designed to be a comprehensive piece of legislation that provides tax cuts, spending cuts, increased spending for defense and border security, and other provisions. Even though the bill has passed the House, it is highly likely to undergo significant revisions in the Senate.

Given the challenging nature of the legislative process, individuals and businesses should remain cautious and not rely on any specific provisions or measures being included in the final version of this bill. Aprio’s Tax advisors are proactively monitoring tax legislation developments and are prepared to help you navigate the potential changes.

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